Provided by: European Central Bank
Official Decision: Press Release
Official Release: Introductory Statement

The ECB kept interest rates at 4.25% in a bid to fight inflation even as the euro-region teeters on the brink of recession. Policy members continue to be concerned about inflation to wages and seems to have keep the same biases as in their meeting last month. Limiting second-round effects has been a consistent message from the ECB in recent months. Consumer inflation eased to 3.8% in August from a 16-year high of 4% in July, but that figure is still far above the ECB's target of 2%.

The EUR/USD had been climbing overnight, and reached an session high near 1.4545. It fell following the release, and was wavering back and forth as Trichet held his press conference.

From the Release: "To sum up, a cross-check of the outcome of the economic analysis with that of the monetary analysis clearly confirms the assessment of upside risks to price stability over the medium term. The information that has become available since the last meeting of the Governing Council has confirmed that annual inflation rates are likely to remain well above levels consistent with price stability for a protracted period of time. The growth of broad money and credit aggregates is now showing some signs of moderation, but the still strong underlying pace of monetary expansion points to continued risks to price stability over the medium term. The latest economic data also confirm the weakening of real GDP growth in mid-2008. This reflects partly an expected technical reaction to the strong growth seen in the first quarter as well as dampening effects from global and domestic factors, including direct and indirect effects from high commodity prices. Against this background, it remains imperative to avoid broad-based second-round effects in wage and price-setting. In full accordance with our mandate, we emphasise that maintaining price stability in the medium term is our primary objective and that we are resolute in our determination to keep medium and long-term inflation expectations firmly anchored in line with price stability, thereby preserving purchasing power in the medium term and supporting sustainable growth and employment in the euro area. On the basis of our assessment, the current monetary policy stance will contribute to achieving our objective. We will continue to monitor very closely all developments over the period ahead."

Provided by: European Central Bank
Official Decision: Press Release
Official Release: Introductory Statement

The ECB left rates at a seven-year high in order to fight inflation even as signs mount that the economy is slowing considerably. Trichet, in his press conference following the decision, said the Council expected such a retraction to growth in the 2nd quarter after robust growth in the 1st quarter. He reiterated that anchoring price expectations is still its main concern as the bank tried to make clear in the last meeting when it raised rates from 4% to 4.25%. Most of the statement was a reminder of last month's message. He went on to say that the recent weak data coming from the Euro-zone is the downside risks the bank had anticipated materializing. The 2nd and 3rd quarters growth figures already are accounted for as the Euro-zone hits a trough" in GDP growth. Oil and food prices remain "high and volatile" which continue to pressure producer and consumer prices. Part of the introductory statement is reproduced below.

From the Release: "To sum up, a cross-check of the outcome of the economic analysis with that of the monetary analysis clearly confirms the assessment of increasing upside risks to price stability over the medium term. Annual inflation rates are likely to remain well above levels consistent with price stability, and monetary aggregates continue to grow vigorously, with so far no signs of significant constraints on bank loan supply. The latest economic data point to a weakening of real GDP growth in mid-2008, which in part was expected after the exceptionally strong growth in the first quarter. Against this background, it remains crucial to avoid broadly based second-round effects in wage and price-setting. In full accordance with our mandate, we emphasise that maintaining price stability in the medium term is our primary objective and that it is our strong determination to keep medium and long-term inflation expectations firmly anchored in line with price stability, thereby preserving purchasing power in the medium term and supporting sustainable growth and employment in the euro area. On the basis of our assessment, the current monetary policy stance will contribute to achieving our objective. We will continue to monitor very closely all developments over the period ahead."

Provided by: European Central Bank
Official Release: Press Release
Official Release: Introductory Statement

The ECB raised interest rates to a seven-year high of 4.25% in order to combat red-hot inflation. It comes despite signs that the economy is cooling. The increase was signaled far in advance, and was not a surprise to the markets. Inflation hit a 16 year high, with June preliminary reading showing annual consumer inflation at 4%. The ECB is concerned that high consumer inflation will cause wages to increase at too fast a pace, creating a wage-spiral and increasing inflation expectations. Some countries like Spain and France are concerned the ECB is not paying enough attention to the growth outlook as it deteriorates with high oil prices, a strong Euro making European goods more expensive abroad and continuing tight credit conditions.

The statements by ECB President Trichet did not seem to reinforce the perception that the ECB was signaling further rate hikes ahead, and the EUR/USD had a swift move downward in favor of the Dollar. The pair fell from its high near 1.59 to trade almost 150 pips lower at one point near 1.5750.

From the Release: "On the basis of our regular economic and monetary analyses, we decided at today’s meeting to increase the key ECB interest rates by 25 basis points. This decision was taken to prevent broadly based second-round effects and to counteract the increasing upside risks to price stability over the medium term. HICP inflation rates have continued to rise significantly since the autumn of last year. They are expected to remain well above the level consistent with price stability for a more protracted period than previously thought. Moreover, continued very vigorous money and credit growth and the absence thus far of significant constraints on bank loan supply in a context of ongoing financial market tensions confirm our assessment of upside risks to price stability over the medium term. At the same time, while the latest data confirm the expected weakening of real GDP growth in mid-2008 after exceptionally strong growth in the first quarter, the economic fundamentals of the euro area are sound. Against this background and in full accordance with our mandate, we emphasise that maintaining price stability in the medium term is our primary objective and that it is our strong determination to keep medium and long-term inflation expectations firmly anchored in line with price stability. This will preserve purchasing power in the medium term and continue to support sustainable growth and employment in the euro area. On the basis of our current assessment, the monetary policy stance following today’s decision will contribute to achieving our objective. We will continue to monitor very closely all developments over the period ahead."

Provided by: European Central Bank
Official Release: Press Release
Official Release: Introductory Statement

The ECB held rates steady at 4%, as was expected, as it tries to continue to combat persistently high inflation. Firms and consumers are dealing with record energy and elevated food costs, cutting into profits and incomes. Workers are demanding higher wage increases to keep up with prices, which is a type of second-wave inflation that the Governing Council is concerned about. In the meantime, workers are consuming less to compensate for higher prices. There are signs that in addition to lower spending, the Euro-zone economy is starting to feel the pressure of higher credit costs and a stronger Euro. As the ECB has to balance both higher inflation and weakening growth, it is expected that it will maintain its 4% rate for the rest of the year, though those policy makers most concerned about inflation may call for an increase in rates. ECB President Trichet admitted that several members made the case for higher rates during his question and answer session following his press conference.

In his introductory remarks, Trichet stated that price stability is the prime objective of the central bank. Inflation had "significantly" increased since last year and would remain at elevated levels for longer than first thought. The central bank was "in a heightened state of alertness" and that anchoring these inflation expectations would be their main concern. "The Governing Council is monitoring wage negotiations and price-setting behavior in the euro area with particular attention." He also noted that the growth seen in the 1st quarter was due to temporary factors and that there was high uncertainty surrounding the economic outlook and that downside risks to growth prevail.

Provided by: European Central Bank
Official Release: Introductory Statement

The ECB held rates at 4%, a six-year high, and reiterated its stance that combating inflation in the medium term is the Governing Council's main objective. Inflation has been pushed up by soaring food and energy costs, and is above 3%. In order for the Bank to consider lowering rates, in order to help growth, inflation would have to ease. The ECB is not expected to cut rates until at least September. A recent batch of data has showed that Europe, and its largest economy Germany, are beginning to succumb to the pressures put on the global economy by the US led global slowdown.

The Euro pared its losses from the beginning of the session against the Dollar.

From the Release:

"On the basis of our regular economic and monetary analyses, we decided at today’s meeting to leave the key ECB interest rates unchanged. Inflation rates have risen significantly since the autumn, owing mainly to increases in energy and food prices. As we have said on previous occasions, inflation rates are expected to remain high for a rather protracted period of time, before gradually declining again. The latest information confirms our assessment that upside risks to price stability prevail over the medium term, in a context of continuing very vigorous money and credit growth. At the same time, the economic fundamentals of the euro area are sound, and incoming macroeconomic data continue to point to moderate but ongoing real GDP growth. However, the level of uncertainty resulting from the turmoil in financial markets remains unusually high and tensions still persist. Against this background, we emphasise that maintaining price stability in the medium term is our primary objective in accordance with our mandate. The firm anchoring of medium to longer-term inflation expectations is of the highest priority. The Governing Council remains strongly committed to preventing second-round effects and the materialisation of upside risks to price stability over the medium term. We believe that the current monetary policy stance will contribute to achieving our objective. We will continue to monitor very closely all developments over the coming weeks."

Provided by: European Central Bank

The European Central Bank held rates stead at 4%, a 6 year high, in order to combat inflation, currently running at a 16 year high. They do so despite the Euro's strong appreciation (and the effects on European exports) and as a credit squeeze threatens to slowdown the economy. Expectations are for the Euro to start lowering rates perhaps in September.

Provided by: European Central Bank

The ECB kept rates steady at 4.0%, and ECB President Trichet said that policy makers are primarily concerned about elevated inflation in the Euro-zone. Annual inflation was 3.2% in February 2008, unchanged from January, and the highest since the introduction of the Euro. 

Introductory Statement by ECB President Trichet

"On the basis of our regular economic and monetary analyses, we decided at today’s meeting to leave the key ECB interest rates unchanged. This decision reflects our assessment that risks to price stability over the medium term are on the upside, in a context of very vigorous money and credit growth. The current short-term upward pressure on inflation must not spill over to the medium term. The firm anchoring of inflation expectations over the medium and long term is of the highest priority to the Governing Council, reflecting its mandate. Against this background, the Governing Council remains committed to preventing second-round effects and the materialisation of upside risks to price stability over the medium term. As the reappraisal of risk in financial markets continues, there remains unusually high uncertainty about its overall impact on the real economy. While the economic fundamentals of the euro area are sound, incoming data have confirmed that the risks surrounding the outlook for economic activity lie on the downside. We will continue to monitor very closely all developments over the coming weeks."